>> rose: welcome to the program, tonight jack lew, secretary of the treasury who came for a conversation at about the same time that senate passed a debt ceiling rise following the house action yesterday. >> when you make decisions in constrained resources, you are fundamentally deciding if you can't have everything what is most important, and i don't believe -- i believe that hardest decisions in budgeting are not choosing between good and bad things, the there are disagreements people have, the hard thing in budgeting is when you can't have all the good things you want, which ones are most important, and it is making those decisions correctly in a way that reflects your values and build as foundation for the future that is really a challenge. >> rose: jack lew, secretary of the treasury, for the hour, next. >> funding for charlie rose is provided by the following. >>

>> i have been around long enough to recognize the people out there owning it. >> the ones getting involved, staying engaged. they are not afraid to question the path they are on. because the one question they never want to ask is, how did i end up here. >> take ownership of their extremities like they do in every other aspect of their lives. additional funding provided by -- >> and by bloomberg, a provider of multimedia news and information services worldwide. captioning sponsored by rose communications

from our studios in new york city, this is charlie rose. >> jack has the distinction of having worked and succeeded in some of the toughest jobs in washington, and the private sector. as a congressional staff never the 1980s he helped negotiate the deal between president reagan and tip o'neill to save social security. under president clinton, he presided over three budget surpluses in a row. so for all the talk out there about deficit reduction, making sure our books are balanced, this is the guy who kid it. >> rose: jack lew is here, he is the 76th united states secretary of the treasury, he has served in that role since last february, previously he served as director of the office of management and budget for president obama and president clinton, his career in politics began as an aide to speaker film o'neill where he cut deals with president reagan, the tax of representatives passed a clean debt ceiling yesterday increase

alleviating growing treasury on the treasury, pressure on the treasury to pay its bills. there is disappointing job numbers, i am glad to have jack lew back at this table, welcome. >> good to be with you, charlie. >> rose: i should also say you were chief of staff to the president as well. >> i assume all those jobs served you well as secretary of the treasury, because of what that job entails. >> charlie, i would say that there is nothing i have done that hasn't been helpful in preparing me but there are still great challenges in this job. you know, the combination of the familiarity with the detailed federal government that you learn at omb, managing decisions across complicated organizations and understanding the political frame in which things have to be decided is all pretty good training, but treasury is a very special place and it has been a great honor t to be a secretary for the past year. >> rose: do you believe budgets reflect values? >> i do believe that budgets reflect values, when you make

decisions in constrained resources, you are fundamentally deciding if you can't have everything what is most important, and i believe that the hardest decisions in between good and bad things, there are disagreements that people have, the hard thing in budgeting is when you can't have all the good things you want, which ones are most important, and it is making those decisions correctly in a way that reflect your values and build as foundation for the future that is really the challenge. >> rose: and do you believe that the present budget we have reflects the values that you and the president have? >> you know, i think that in a constrained world, we are making progress. i wouldn't say that in an unconstrained world i think everything we need is happening. but i will point out that in the appropriation bill that passed just a few weeks ago, tucked in there were some important things, money to get child education programs going, there

was money to get some manufacturing centers going, that's places where you bring i have and higher education together to make things happen in the area. there was funding for grants in the transportation department to build the kind of transportation hubs that we need for the economy of the future. are there more things we need to do? absolutely, there is so much we could do if we could reach more political consensus on infrastructure, on things like early childhood education and skills training. i think you have to take things and get -- work on reaching a compromise and agreement where you can, and frankly the last couple of months have been encouraging duncan in the more positive direction, you saw congress pass a budget in december. >> rose: right. >> you saw congress passing an appropriations bill in january. >> rose: and just the house passed the debt ceiling. >> yes and inbetween a farm bill that had been locked up for years in disagreement and just yesterday as you point out the debt ceiling passed the house

and that takes away the threat of self-inflicted wound, which, you know, would only have hurt our economy. so i am an optimist if you have a couple of months of seeing the benefits and working to get things done, there is more we can do, i don't believe things like infrastructure are partisan issues, in almost four years, 40 years working on these issues, republicans and democrats alike want to build a better country and invest more, they thousand have the conversation about how to do it g if. >> rose: mentioning infrastructure someone said look the it is the time to invest in our future but we are not doing it the way we should. >> i agree we are not investing as much as we should. i think this would be a time where we would be wise to be putting resources into the things that we are going to need to be a vibrant economy for the rest of the 21st century. and you need to have -- when i talk

to ceos and guy around the, go around the country, the two things i hear from them as the questions they ask when they decide whether to invest in the united states is will there be infrastructure to get what we need in and out of our factories, and will we have the work force we need not just today but five years, ten years and 20 years from today to fill the jobs that need to be filled. i think the answer to both of those questions is yes in many ways, plus we have abundant energy resources that are making the cost of business cheaper but we have to make sure the answers five years and ten years from now are yes, and we know that we don't have the infrastructure, the roads, the ports, the airports, that we are going to need and we know we can use good middle class jobs to build those things now so we will try to get more investment in those areas. on skills training, you know, it is kind of the human capital side of the equation and

particularly in an economy that is increasingly defined by technology driving things very fast and very hard. we know that, a, you need people with the skills in order to grow as an economy and you need to have skills in order to add snrans this economy. which is why everything from early childhood education to graduate education with things like skills training, community college and four-year colleges in the middle is critical to our future, so, yes, we have more to do, i think these are areas where we ought to be able to still make more progress. >> rose: you are optimistic for the country, larry fink was here last night and manages more money more, more than anybody else, $4 trillion at black rock and he said the three things that encourage him about the u.s. economy is the energy discoveries we have, secondly, it was that america's private sector is sitting on a lot of money to invest in their own cash accounts and third we now seem to have a regulatory structure in place that will allow banks to really play a

significant role. do you agree with that? >> i think all of those are reasons for strength, i would add a couple of items to that strength but let me speak to those three and maybe add one or two. i think that, you know, transformation of energy resources in this country over the last five years, ten years is nothing short of a revolution in both the availability of domestic resources that are cheap and make us more competitive in the world so we have security and we have competitive advantage. you know, i think that the challenge of the future is to make sure we continue use those resources and to do it in an environmentally conscious way but to use them to keep growing our economy. i think on the regulatory side we work to get to clarity and finality of some of the issues coming out of the financial crisis from the frank dodd law, we finalized the voelkel rule at the end of last year and got rules that are about to be final and some, in some very important area that leave you with

financial institutions that have more security and the stability, more capital so that they are taking their own risks and responsible and able to bear them. hthey have plans that if they ht hard times it is not going to be a taxpayer responsibility. and they have -- and we have done things like the vehicler rule that reduke the amount of risk .. there are challenges in the future and focused on them but i do think that we have, you know, a great more deal of certainty than we had even a year ago and i am pleased -- >> rose: corporations say what they need to make the kind of extremities that would bring on more jobs, and, you know, new plant capacity and that kind of thing. >> i would add to that list that, you know, we have a resilient economy and a resilient work force. we have -- you know, we have responded to the financial crisis and economy crisis of 2008, 2009 with the kind of determination that i don't know of any other country to beat, we did it in terms of things like the recovery act that have put

people to work and built things we need in this country, some of the infrastructure we were talking about. we responded with the dodd frank act, where we got ahead start over the rest of the world in getting our financial institutions straightened out and when, and people never give up and i think it is important this week and in passing through the votes on the debt limit with relatively little drama is we are seeing government not putting a burden on the economy that makes it harder for the american people, the self-inflicted wounds of the last few years kind of slowed down some of the economy recovery, just as it was taking off, i am pleased we are not seeing that right now. >> rose: what do you think changed? >> well, you know, i think first of all, you know, you go through an experience like the government shut down and the crisis over the debt limit in october and -- >> rose: people took lessons from that. >> people learned from it, i took to heart that there were no

leaders who minimized the importance of resolving it in a way that didn't have a lot of drama and didn't have a lot of anxiety for the u.s. and the global economy. it was politically challenging, it is difficult to do, it is not new. it is a work of government often requires doing things that are politically challenging and hard to do, but i think getting there in a way that leaves the economy in a place that continues to gain momentum, you know, we have had some economic statistics that go one way or the other, but the trajectory over the last six months is undeniably been in a positive direction. >> including jobs? >> if you look at the job numbers there have been some confusing cross signals but the trend, we have seen eight and a half million private sector jobs in this country since the beginning of the administration, we have seen like just last month we have seen manufacturing construction strong. i would love to see consistently high jobs numbers every month, but the trend is still in the

right direction we still have a lot more to do and until we have an economy where everyone who wants to work can get a job and everyone who wants to work full time can get a full-time job we are going to keep at it but we are making progress and the important thing about not having self-inflicted wounds is an economy needs to build up some momentum and it needs to have ahead of steam. we started the year with tail winds and we had a couple of economic statistics people are asking about but we have a consensus the economy is still growing and growing at a healthy rate. >> rose: there is also this. i mean, people look at the economy and where it is going, what is your assumption in terms of growth rates for 2013 and 2014? >> well, obviously, 2013, we know the fourth quarter ended strong. >> rose: 2014, 2,015. >> second half of the year ended strong and that's where we begin, 200014, twowrn, whether we see consistent growth rates

in each quarter is not the question but what is the trajectory over the year, and we will put out a budget in just a few weeks with specific assumptions, but, you know, i think it is fair to say when we the look at things like the blue chip economics and other forecasts and things are hovering, you know, at a rate that shows the heading we are growing just at beyond three percent those are the kind of numbers that we are looking at and i think that the challenge is going to be t to me sure we do everything we can to encourage that growth to continue. so, you know, making sure that we the do the regular business the way this week appears to be showing we are doing is important, if we can make some of those investments it would be very much helpful, it would be a shot in the arm to the economy and help build a foundation for the future. i think that the economy if you look at manufacturing, if you look at construction, there is -- and housing we have seen

values come back in a lot of housing markets. we have seen construction growing, but not as rapidly as we would like. that is an opportunity for the economy to do better yet. we haven't seen the limit of how much improvement we can get so i think there are going to be ups and downs in the numbers and i spent the better part of three decades advising other policy makers not to react too dramatically to a weekly or monthly sat, look at the trend. the trend is very positive. >> rose: but there are also people who look at the u.s. economy and i know you are aware of this, even before the recession of 2008, and say there were some fundamental issues there that were problems, problems that may prevent this economy, unless it changes, to go back to the kind of full employment we had. >> look, i think it is very fair to say that going into the financial crisis, there were challenges in our economy in terms of the -- the

technological change was due. >> rose: structural weaknesses. >> structural weaknesses and we had this once in a generation financial crisis, where it is the worst economic period of my lifetime, which exaggerated and underscored how bad it was. we have to separate the recovery from the long-term problems, and it is a little hard to do, because sometimes you go through an economy crisis and the question is, do you completely catch up? >> rose: exactly do. >> you make up for the lost frowned. you know,. >> rose: will we? >> i think we need to make sure we do what we have go to make sure that workers, young people, people in the middle of their careers have the skilled they need in the modern economy, if we do our part, if we make sure that we are building the infrastructure and training workers and running our policy, economic policy in a way that gives people confidence that they are stable and predictable certainty, i think we can pull

through this and make up for the lost ground. >> rose: but we can't -- >> it is going to be hard. >> rose:. >> we can't do it with the kind of executive orders that the president talked about in the state of the union speech when he talk about the kind of action you can take. those are not, enough, sufficient to correct the problems with the economy. there are no problems that a large policy decisions in our country are made flu legislation, that is our system and that is why the president has proposals for legislative programs the in a lot of these areas, but, you know, let's take infrastructure. i think there is a great deal we need to do. in the omnibus appropriation bill that passed were hundreds of millions of dollars for infrastructure, it is not the same as billions of dollars but we are now in a position to make what are called tiger grants that are going to really create jobs and more of a foundation for economic growth in communities around our country, there is money in the omnibus appropriation bill for

manufacturing centers, we have a couple set up, i visited one a few weeks ago and it is excited to see stees of, ceos of companies, both research and technical school educators accordincoming together to helpe breakthroughs to do better manufacturing and train the workers to have the skills for the jobs, and then to attract investment into the area. so if we are able to get a political consensus to do more, it would be better. i am not chaning the thesis, the president has said. >> rose: is there any reason to believe the political consensus is possible now based on the indications of what we have seen, you know, so far in the last several months? >> well, i tend to be an optimist charlie, as you know, but i think if you look at the last couple of months it gives a reason to be optimistic. having had a budget agreement and the appropriations, having had a farm bill, having a path to get through the debt limit in a way that is more business like and without a lot of disruption,

you know, in my experience, infrastructure is not traditionally a partisan issue. it doesn't matter if you are a democrat or a republican. >> rose: some might see it as spending and therefore it becomes a partisan issue. >> well, i don't really think -- there is broad bipartisan support for making sure that we have the roads and the ports that we need in this country, you look at the water resources bill that passed the house with 400 votes, over 400 votes, the challenge is putting the consensus together, if we can breakthrough the gridlock that makes it challenging to have conversations, regular order actually matters, congress worked through, i won't say the punishment agreement was the biggest budget agreement of all-time, but it was very important, it is very important to be able to do the business of governing, so i do take optimism from a series of actions that show that, if you you you lookn issue like immigration reform i think it is good for our economy and there is a path forward still, i think more can happen this year. >> rose: you think there is a

path forward on immigration reform in this congress? >> i actually do. >> rose: even though speaker boehner said it is impossible? >> well, i think -- >> rose: and blamed the president as the reason it was impossible? >> i think if you look at the substance of immigration reform, there is broad agreement that there is policy areas where there could be consensus. i think there is broad agreement on both sides that -- >> rose: one is immigration and one is getting ready to go into midterm elections is the political reality. >> i will leave it for others to make their own political decisions, i would personally argue there is a case where good policy and good politics ultimately come together which is why i am more optimistic. i am not saying it is a certainty but the conversation is by no means over, and the challenge of doing hard things is to keep at them. you can't take every momentary setback as being a reason to stop. that creates a certainty that nothing happens. >> rose:. >> we have to keep pushing

forward and that's what the president will do on these important issues. >> rose: i also think you said this year, 2014 is not the year for long-term physical changes. i mean, in a sense that we ought to take the short steps now and not try to deal with the long-term debt challenges and what we mean by that i think the challenge from healthcare the challenge from entitlements and some other issues which you think cannot be dealt with right now because the focus ought to be as you is have suggested on growth and growth will enable you to reduce the deficit. >> i think if you look at the big long-term issues health is clearly the biggest and most challenging one and we have done a great deal in health, by putting in place a new set of policies we have triggered a reduction in spending on health that is showing a marked impact i would say the entire reason we are seeing slower healthcare growth, cost growth is the affordable care act but it is a

part of it, it is a big part of it and we are seeing the slowest rate of growth in healthcare costs in in a very long time and seeing people get access to coverage which is going to lead to more access and security and stability which is ultimately what we are trying to achieve through a strong and growing economy, so i think we actually have tackled a lot in health, undoubtedly there is more to do in the future, but i don't think, i don't think that is an area where we can be accused of not having tackled quite a lot. >> a lot was done because of what the president said you won't have to change your, if you want the healthcare plant that you have now you won't have to change it. how much damage do you think that did to the president's credibility and to the country's attitude about healthcare once they saw the reality of that and once they saw the obvious technical issues taking place at healthcare.gov. >> i think the president made

clear that there were problems in the rollout of healthcare.gov. >> >> rose: that is the rollout, this is content. >> well, we are getting beyond the technical problems of the rollout, and people are seeing the choices they have clearly, and i think people are going to like the choices they have as they understand them and that is ultimately going to be the test, it is not abou about what peopld two or four years ago. >> will that be the legacy of this president, you think? >> it is big, it is one of the most significant pieces of legislation in my lifetime so it is going to be a legacy and we are determined for it to be a successful elect situate and i think it is going to be good -- it already is good for the economy and it will be even better as more settle in. >> clearly there are partisan difference but they can go to the country in the midterm elections on healthcare and win and therefore they didn't want it to be clouded by immigration discussions. >> you know, i think i am comfortable making a case to a family tha that is already benefitting from the kinds of security that the affordable

care act provides as i just did with you, if anyone, you know, suffered a childhood disease in their family, the notion that they wouldn't have health insurance in the future, that is a tragedy for the family, that is never going to happen again. that is a big deal. >> rose: what do you make of the senate's refusal to extend unemployment benefits? >> well, i hope that we are not done with this debate, unemployment benefits being extended is very important, you know, if you look at the unemployment statistics, you know, we have seen a kind of splitting of the roads where the short-term unemployment rate is approaching historical levels and long-term unemployment rate is staying quite high. now, it is not that people don't want to work. there are all kinds of complicated reasons that once you are out of the work force for more than a couple of weeks, a couple of months it is harder to get back in. people who are trying to find a job, in an economy where it is still channelling for them to find a job need to have extended

benefits. >> rose: do you believe we can get back to full employment that existed before 2008? >> >> i think we are still. >> can we get there and how long? >> i am going to have to resist trying to predict how long. but i think we are going to see the kind of recovery that gets us back to a place where people who are looking for work can find work, and, you know, i think it is going to require that extra effort, both in terms of giving people a chance as we were just talking about but also making sure they have the skills they need. if the job you had is a job that is no longer available, we need to make sure you can get the skills for the jobs that are available. >> rose: that takes an investment in the future and that makes a new political debate in washington. >> some of it requires new and some of it requires, you know, when i just told you the story about the manufacturing centers. >> rose: right. >> -- we have a lot of resources in this country to match people together. if you have a community college

and i have a factory and you are doing two-year certificates in a field that doesn't provide the skills i need, if i can talk to you in a place where you understand what i need, i think people would sign up for that certificate program. i don't think it is -- we are seeing that work where we do it that way, i saw it in virginia just two weeks ago and i think we can make progress there. there is no doubt there are going to be changes in the economy going forward, we get great benefits from technology in terms of services and information that are available. we see economic growth that is coming from it, but we also see a change in the nature of what jobs the economy has. >> . it is interest to me, the president of france came to this country, he went to monticello with the president and had a steak dinner last night in washington which i think you attended and now he is out to silicon valley, every leader who comes here wants to go to silicon valley, would we be able to in your judgment maintain the

kind of lead in technology when we see what is happening in the world? >> i think if you look at what the strength of our economy has been, not just for the last decade or two but just over our history, it has been entrepreneurship, it has been innovation, it has been the breakthrough discoveries. >> rose:. >> >> rose: can that dna, other countries achieve that, it should not necessarily be, not in our interests for them to be able to do that, because a growing global economies provides opportunities for american companies for the growing economies. >> i don't think we have a monopoly in this but a distinct advantage we have the best universities in the world, we have a history of risk taking that is what you need to have in order to make these breakthroughs and i actually think that is the reason to be hopeful about the american economy but we have to do our part and make sure we continue to invest and research and development. >> rose: what worries about what you have thousand but when you look at some of the rankings of education when we are not at

the top of the list. >> when you look at higher education and people come here for higher up. >> rose: but we have immigration rules that make them go back to the country of origin after they get the american education. >> we need immigration reform i won't argue with you on that principle, we need to do immigration reform because it is in our dna as a country. >> rose: having to do with borders and all of those kind of things. >> it is connected because when we deal with immigration reform we will be dealing with multiple issues i think it is difficult the apart to to and deal with the high skill worker issues and not the border issues, the truth is even the border issues have to do with how we continue to be a strong and try brandt economy. when i look at the technology sector i see a lot of innovation still in this country, i see startups that are able to get capital, i see ideas that fake hold and then spread around the world, so i am optimistic we will continue to be leaders in

that area and i think that is one reason you see the trips like president elan is doing today to silicon valley. >> rose: i want to get to china a minute because you were right there, and you spent time with the leaders there, and let me stick with financial reforms in this country and dodd frank, we mentioned that the beginning, this is, does this mean too big to fail is no longer a problem in america as it was in the 2008 crisis? >> charlie, i think if you look at our financial regulatory system and the condition of our financial institutions as compared to 2008 to now, there is a world of difference. we have taken decisive action, where it is now -- we have a better capitalized set of financial institutions. we have rules in place that govern what happens if an institution fails. we actually have visibility into the largest financial institutions, so they have living wills that say, this is what happens if we fail.

so that the burden is borne by our shareholders and not by the public. we have resolution rules, something called the single point of entry which now the world is copying to figure out how to do it. the truth is -- >> rose: as it remains -- the question that you asked, i am frequently asked, fundamentally, can only be answered in a financial crazies, and the question is, have we made dramatic changes? are we dramatically stronger? the answer is unequivocally yes. are there no other threats? i have spoken clearly to the fact we still have challenges out there. i will mention. i mentioned briefly earlier, you know, shadow banking and cross border resolution. we have as regulated institutions in the united states and around the world are becoming more closely supervised. there has been a shift to resources into institutions that are outside of the traditional

banking world which isn't a bad thing in and of itself, unless the risk there gross to the, grows to the point that it in itself creates the risk of a systemic problem, so we have work to do on those kind of issues in the united states and internationally, cross border resolution when lehman failed one thing we sfaw is it wasn't enough to say can we resolve an institution of the united states but what happens oversees? we have made progress on those both of those issues we have more to do. >> rose: international is a great concern to you even sew there is some sense of standard around the world so there is not a. >> a high standard. >> rose: a high standard around the world so it is not capital shopping. >> well, you don't want cap -- you know arbitrage where you see low, lowly -- lightly regulated markets, putting the rest of the world at risk. i think we have made great progress. we have way more progress to make in the international space.

we have seen progress on issues like capital and leverage rules where, you know, the world met just a few weeks ago and adopted a standard very similar to the one our regulators wrote. we are now seeing our regulators revise their standard to conform with an international standard that meets our standard. that's a good thing. we want to have harmonized rules at a high level. we are seeing it in -- >> rose: and -- >> when i go to the -- >> rose: sydney. >> a it is my on my agenda in this year in the g 20 is to bring these issues to the table and to drive the discussion in places like, you know, the g-20s, the fsb, and the oecd where countries come together to reach agreement on high standards. >> rose: are you more optimistic on the global economy today, taking into account europe and china and brazil and -- >> certainly we are going to see more growth, the ims most recent global economic shows we are going to see more growth than we

did in recent years. i see pockets that were, where policy could actually increase the growth and that is something that we are very much posed on, because one of things things when we, that we do when we come to our meetings we urge our friend around the world to do things that can help drive global growth. if you look at the world economy, the u.s. cannot grow at a rate fast enough to pull the whole world along. >> the difference between three percent and three and a half percent makes a world of a difference in the united states but not enough to make up for losing a percent in europe or losing a percent in china or losing a percent in japan. you have to look at these major parts of the the world economy and how can we improve? >> looking at europe the countries that have surpluses could do more to stimulate growth, stimulate demand, europe needs demand, the world needs more demand, in japan we have seen for the first time in almost two decades policies that have brought the economy out of

deflation and is growing but they plead to make the kind of reforms that can make that a future of growth, and they still have reforms to deal with. >> rose: go ahead. >> china. >> #02: klein is growing but china has to reform its economy and i think they know they have to reform their economy ask. >> rose: in what way d do they have to reform the economy? they need to make it more market oriented they clearly say they want to have more competition with the public sector, with the state capitalism, i was in china a couple of times last year, and i was there just days after their plentum completed the deliberations, i had a chance to talk to them before any world figure that came through town. >> rose: one-on-one conversations? >> one-on-one conversations with the xi ping an and my counterpat and the economic team. you know, they understand that the signals of the need for

market reform are all around them. they have inventory that isn't being sold from state owned enterprises and excess capacity in real estate, all of the obvious signs that they need more market forces in order for the economy to grow. they know they need more consumer demand, they know they need a stronger safety met so that people don't feel that they have to save so much that demand is out of their reach. now, how fast they make those changes is a separate question. >> rose: well they have been committed to the idea of turning their economy around from an export economy to a consumer demand economy within their own country for several years now. >> i think you have seen a change, though, even in the last year, you know, you look at the statements that xi ping has made, and chong has made, it has been quite a bit of detail about the need to have competition in financial markets markets, the need to have a move towards a

market determined exchange rate, the need to have the allocation of capital be a market determined decision. what you also hear is that they worry about the disruption that comes as you move from a very controlled economy to a more market driven economy, and, you know, as you look at the rate of growth in china some of the reforms, it may sacrifice some short-term growth as they go through the adjustment, they need to have the adjustment, but the disruption may cause some friction, the pace of change is something we will have to keep pressing on and we have good conversations on this. >> rose: two questions then that come out of that. one, is there, in your adjustment, judgment, a sense to truly have the kind of economic reform think have, they have, they may need political reform? >> i think that -- i think they have the ability to make decisions in their system, you know, it is one of the things that for years people said they can make decisions more easily

than others, like we can. >> rose: you order it tonight and it is in effect tomorrow. >> i think as you look at the changes in china, they are not all towards more openness and premium, already some areas where you are seeing them close down in terms of security. i think on the economic issues, you know, they know that they have a population that is moving into the cities, that needs employment, that is starved for demand, and that is going to retire and need to have some security. i think they know the policies. they need to start making decisions and they need to open their markets to competition. >> rose: yes. exactly. >> and that's what we are hoping to continue to make progress on. >> rose: clearly cypress security is a big issue in this country and conversations with china. >> we talked extents civil about the cyber security issues and cyber security and cyber theft are somewhat different issues and it is important to distinguish them, the issue we have raised with china ask really the protection of

intellectual property. >> rose: right. >> and policies where there is a theft of intellectual property are just unacceptable for a country that wants to sit at the table and make the rules for the world, china sees itself as a country, appropriate i are that, appropriately that should have a voice in making the rules for the next generation, they can't have it both ways. >> rose: that's right. but that was particularly -- by a former deputy secretary of the treasury in a speech that if you want to be part of the global community you have to take responsibility to be part of the global community. have they accepted that in your judgment? >> i think they have a clear understanding that is is going to be necessary and we are making -- we are going to continue to have to press on the issue. i think they very much want to have that kind of a voice in the world economy and in making the rules -- >> rose: but you think they have accepted the idea with respect to responsibility brings a sense of commitment to a certain kinds of international

codes. >> we are being cautious, where we are being cautious, charlie, i do believe there is an understanding and a commitment and i haven't yet seen the sequence of events that will five us confidence it is happening and that's why we have to stay engaged and keep pushing because the or we push the more progress they make. >> rose: so if i had -- how long was the meeting with xi ping. >> about an hour or so. >> rose: an hour or so? >> i don't know who sat with him for an hour, and i mean was there something you really wanted to immediately as soon as you left the meeting called the president and said you won't believe what i just heard? i mean was there anything that made you say, wow, this ads to changes, alters, confirms my expectation of new leadership in china? >> well this was not my first meeting with him, so. >> so you knew him? >> i god a little bit of a -- >> rose: this was the first one after the men numb. >> which is a, plenum. >> which is a big deal to them. >> they said we will all prepare for a thing that is a big deal or thinking about what we said

at that meeting, so i think i got a presentation that was similar to what he had said at the plenum, because we are all wired -- >> rose: what do you think he wanted to -- >> i heard kind of a narrative of chinese history that was very interest, that, interesting. >> rose: what is narrative? which means you need to understand our history to understand where we are and where we might want to go? >> more that we have to make change in a way that we understand our history, and we are going to make -- we are still a country that is a communist country, that is accepting market conditions for the future of the economy and we can reconcile the two, and the change is going to be in a frame where the two can be harmonious as opposed to we are just going to move from our past to some new future. it is going to be an arc, not jumping over and i thought it was an interesting, an interesting way to bring together economic and political

philosophy ideas in a way that probably deeply reflects the context of chinese thought. >> rose: what is their assessment of the relationship with the united states today? you know, i think they very much value the high level contact with the united states, you know, i was really struck when i went there really soon after becoming secretary and then again after the plenum, that on relatively short notice they old the doors to meetings with the president, the vice premiere, the major leaders in the country and it is important to them to have a relationship and a conversation, and -- >> rose: and to be listened to. >> and i come in with a long list of things we are concerned about, it is not as if my half of the conversation is just listening. they are interested to hear us, you know, i think it helps them to hear us. they, i believe, want to learn from our experience and adopt what works in the context of

their economy and their society. >> rose: i assume cyber was obviously on the top of your list, the president said that to me. >> yes. >> rose: i assume currency was at the top of the list. >> currency is always on top of the list. >> rose: has there been a change there? >> i think we have seen progress in terms of the exchange rate gap closing, but we press and press and press, they need to make more progress, and until it is a market determined exchange rate we are going to keep pressing. >> rose: there should be a change in the dollar as the world's reserve currency? >> well, i wouldn't -- i am not sure that i heard that exactly, i think they have a positive desire for the rnb to be a world currency, it kind of goes with wanting to sit at the table. >> rose: what do you think of that. >> you can't become a true world currency if you don't have a market determined exchange rate so i think they are on a path and making progress but, you know, we put out a currency report twice a year, and we are very direct in terms of pointing

to interventions we any are problematic, and, you know, they are aware of how sensitive an issue it is, both to the united states and other countries in the world. and i think they are making zero progress but we need to keep pressing on them to make more progress. >> rose: you left the meeting thinks thinking what is the biggest gap between china and the united states? >> you know, i think on the economic issues, in some ways, not to be ove overly optimistici think we are pushing on an open door with regards to the direction we are encouraging them to go. >> i think they have a different view of time than we do and we are going to find frustrating how slow the progress is and i think they need to understand in order for in relationship to stay strong in a context of both the u.s. economy and public opinion, they are going to need to show the progress in terms fat are a a little bit faster. >> rose: many people will say we have to prepare for that, in other words, it is important on

the part of the leaders of this country to look at the changing dynamics and china not in terms of -- >> depending on whether you look at europe as a group, it is the china is the third largest economy, if you look at it country by country, it is the second largest economy. >> rose: you know what i am talking about. will think replace the largest economy in the world in the next 15 years? >> we are going to be the two largest complicit in the world, we will be together, our growth will determine the health of the world economy along with europe and japan which is why we all have to be looking at ways to increase demand, lower the mare years for trade and raise the standards so we are doing business in a way that raises standards of living and improving the environment instead of the opposite. >> emerging nations thinking of brazil, what is the future of their economy in the near term? >> i think if you look at the emerging economy. >> rose: look at turkey and brazil and -- >> it is important to look not at the group, you have to look at them individually, i think what we have seen in the last

months is real different station between countries that have taken tough policy decisions to have fiscal policies and structural reforms in their markets. >> rose: who would that be? >> i would rather not name names but if you look at the performance of currencies and the performance in the market, there is a real differentiation between countries that have taken the tough decisions and countries that maybe haven't. >> rose: and put us on one of those making the tough decisions in terms of financial regular regulation? >> i think we both, in terms of our fiscal consolidation if anything we have done more in the short run than we should have, so i think we have done well in terms of our banking reforms, we have been tabling the lead in getting our financial house in order. we continue to be a leader in the world on the important issues i think if you look at the emerging markets, there are a number of idiosyncratic things that are creating you know, local problems, it is not at the

moment something that looks to be systemic, but we have to keep our eye on it because, you know, i am very mindful of the fact that in past financial crises things started in place that people may not have expected so, you know, there are a lot -- will is a lot of energy both in the treasury and in institutions like treasury around the world i talked to my counterparts in emerging economies and developed countries, with the imf, with the fed, people are watching it carefully but i think what i am reflecting expresses a broadly held view review. >> rose: has recovery from the 2008 recession been as -- has it progressed as much as you expected it to by this time? >> around the world in. >> , you know, i actually thought about this a lot in 2008 and 2009, and i thought at the time there would be a long, slow recovery because of the nature of the recession, the history of

financial recessions is they are longer slower recoveries. >> rose: right. >> i think what we department know in 2008 and 2009 is exactly how deep it was we only found out when the statistics got revise add couple of years later that the hole was even deeper. >> rose: and how practice million the economy was. >> i think that given how bad things were in 2008 and 2009 we probably shouldn't be surprised but it actually was worse than we knew at the time, so it is probably a little disappointing that it has taken as long. i think if you compare where we were in 2008, 2 now mine to now, we have made enormous progress, if somebody had sat down and, in 2,000 night and told you, 2009, told us our unemployment rate, still as tough to have this unemployment rate would be down to that, they would have thought that was an aggressive projection, looking at growth rates where we are struggling to bet to three percent but, you know, hopeful of crossing

three percent it is not enough, but it is substantial. >> rose: what is the commitment to entitlement reform on the part of this administration? >> i think the president has spoken clearly to that over a number of years. he is -- he has put several times forward the idea we need to do social security reform in a balanced, fairway there hasn't been an environment to have that conversation. >> rose: all right. >> you look at his budgets over the last few years and has made it clear that, you know, tax reform and entitlement reform need to move together. i wish we were at a moment. >> rose: what is he doing about tax reform? >> well, tax reform, i think if you separate business tax reform from individual tax reform they are very different, individual tax reform is tied to the physical, fiscal situation, what the president put forward he did this in july in a speech which he called the grand bargain which is to say that let's do business tax reform, lower our statutory rates, use the one time revenues you get when you

have a transition to the new tax code to finance infrastructure spending and skills training. i still think that is something we should push hard on and the president spoke to it in the state of the union and when i talk to the republicans i am encouraged to keep talking about it so i think there is potential there, obviously it is not ready to happen today or tomorrow but it is an idea we are going to keep pushing. >> rose: you work with tip o'neill and worked on wall street for citibank, i think, you worked with bill county and now you work for and with barack obama. how is he different? >> i have had the privilege to work with some of the really great leaders of my lifetime, and each one is their own person and has their own style, so i am always reluctant to compare them. i look at the strength they each bring. >> rose: the argument goes this way, i want you to speak to it because you are chief of staff so you were right there at the center of everything and you

understood, with ten argument is may that we would be, seem to make progress in relationships between democrats and republicans, some progress. >> if the president, is he economied the to doing more because he believes somehow this is the ripe opportunity to try to do what he wanted to do when he came to washington? achieve a level of bipartisanship or is it too late? >> you know, i think that the president has tried really from the beginning to reach out and work with both sides. if you look at the -- you know, even in healthcare reform, there are ideas that have started out as republican ideas that he incorporated into the way he approached it, throughout his presidency, he has been open to ideas, good ideas from wherever they come, you know, he brings an enormous intellect and intellectual curiosity to every

issue he addresses and he doesn't really care where the good idea comes from and is willing to make compromises to do the right thing. we obviously have been in a very challenging political environment. it hasn't been the ripest moment for the kinds of, you know, direct negotiations that worked in the eighties and the nineties, a little bit better than they work right now and i am not going to cast blame butly just say it is not because the president wasn't interested. >> rose: you suggested that it is biggest problem facing the country was washington. bill gates said the same thing in the book he wrote, to the issue is having to do with the two-mile area there in washington dc between the conflict between republicans and democrats is at the heart of our global position. >> the president, the president tried to engage directly on many occasions through budget negotiations that i was deeply involved in where he were willing to do things that would have been very hard to come back and convince democrats to go along with. you know, you need

to have a negotiating partner who has a comparable ability to go back and make hard things happen. >> rose: and we didn't have that. >> i don't think we had that, i am not casting blame, it is the political lay of the land, maybe it just wasn't the right time for it but it was never his interest or will -- i think one of the things of the story that people tell about kind of whether there is outreach or not, and the president picks up the phone and talks to people -- >> rose: you would know that because you were chief of staff. >> on a very regular basis, that is not -- >> rose: that is not the issue. >> you could spend all day on the phone and if there is not that -- if the environment is not ready, it is not going to produce a different result. >> rose: but you also acknowledge that human relations make a difference in whether democrats in the senate or republicans in the house, they are, in fact, people who are subject to the same kind of ego and there are other issues that might affect how they perceive issues? >> one thing, i think is true is

people are people wherever they are, whether it is in the legislature or in the white house or in the business world or in the university. >> rose: or media. >> or in the media and when people deal with the president i think they feel very much he listens to them i think he shows it not just by his interaction but with the highest form of flattery by taking their ideas and moving forward with them and i think the record shows we have done quite a bit working with congress over the last five years and we have three years left to do quite a lot more, you know, one of the things i have learned in three and a half decades in this world is the times you live in always feel like the most partisan times ever and then when you look back you see the things you accomplished and they kind of jump out of, of the kind of noise of the day, in the eighties it didn't feel like the spirit of bipartisanship. >> rose: tip o'neill and ronald reagan and all of that, the spirit of bipartisanship.

>> there is a lot of romanticism of remembering the eighties, i remember when losing a few dozen democrats lost control of the house floor floor and the reagan program went through congress, what was the different is speaker o'neill did not tie the congress up in knots, he didn't win but he let the process go forward with the confidence that in the end, it would come back to his benefit as it did a couple of years later when we were able to start negotiating but there were some pretty tough words going between the congress and the white house in those days, particularly in the nineties, in this period we have done a lot and we are going to do more. we have got out of the greatest depression since the great depression and the we are improving financial reform, the best in almost 100 years, we saw the affordable care act and it is being enacted changing in a, changing policy in a way that affects every american's life and we are every day doing more and i am bullish on the

opportunity to do more and when people look back they are going to say, going to say boy they got a lot done. >> rose: thank you for coming, it is always a pleasure to have you here. >> jack lew, secretary of the treasury, thanks for joining us, see you next time. >> funding for charlie rose has

been provided by the coca-cola company, supporting this program since 2002. >> american express. and charles schwab. additional funding provided by -- >> >> an and by bloomberg, a provir of multimedia news and information services worldwide. >> you are watching pbs.

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